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tv   Mad Money  CNBC  May 14, 2012 11:00pm-12:00am EDT

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when we all come together, my restaurants, my partners, and the community amazing things happen. to me, that's the membership effect. i'm jim cramer and welcome to my world. you need to get in the game. firms are going to go out of business and he is nuts! they're nuts! they know nothing. i always like to say there is a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to lose you less money. my job is not just to entertain, but to educate you. so call me at 1-800-743-cnbc. not as bad as they are. isn't that what you have to think about the performance of our stock markets with the dow sinking 125 points, s&p sliding 1.1%, nasdaq declining on a day when the european markets were
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on average down twice as much? considering the outsize role europe plays in our stock prices, why is it we do better almost -- do better really almost every single session than they do, even though they do drag us down daily? with so many people terrified that europe will crush us, i think it's time to ask why we are not europe and answer why we shouldn't, shouldn't go down as much as they do. i have seven solid reasons why we don't go down like them, or at least we don't stay down like they do. oh, and i am not painting a pretty picture here. i am just painting a less ugly one. this is a horrible market, a miserable, horrible market that could get better on any given day. but it just feels nauseous. first off, we have many companies with no european exposure whatsoever. the retailers, restaurants, utilities, regional banks, real estate investment trusts, housing plays, they get taken down pretty much every day at the open.
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then they spend the session trying to rebound, rally. some days more lamely than others. but they still do go down less. and why shouldn't they? the only thing that those particular stocks have in common with the companies that do business in europe is that they're publicly traded. second, the weakness in europe is pulling down the commodity complex worldwide. everything from oil to wheat to cotton and all the industrials involved with them. as weak as the overseas sales might be for some of the companies that sell to europe, the expansion of gross margins for the consumer goods companies that comes from a collapse in commodity prices is much more powerful for that cohort. i spent the weekend reading through quarterly conference calls from earlier this year. many of these companies were raising prices to keep up with the rising cost of commodities. now the price increases are sticking for a colgate or a hershey or a pepsi. but the raw costs are falling. the american consumer is in remarkable shape. later tonight hear from bob iger, the terrific ceo at the walt disney company. few businesses have the pulse of the consumer like that company does. of course they have a proprietary product.
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this is because of the spending at the theme parks as well as the almost totally sold out disney cruises. it is emblematic of what i'm hearing about spending across the board in this country. that will only get better as the cost of gasoline comes down over the next few months to mirror the decline in crude. fourth, what is going on in europe when it comes to great growth companies? let's think about this. brands, european brands. when does their facebook come public? when will they come up with something we want? some company's stock we need, must own? as much as you may think that america has little to offer the rest of the world, we still create companies like facebook, that comes public this friday. companies that people want that could be worth north of $100 billion. with the exception of the hard european banks and a couple liquor and handbag companies, can you even name a company you have heard of over there? can you name me anything that you actually want over there? think about it. think about how many great companies are over here. think about what they have over there.
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they have adele. europe has second rate slow growth drug companies. we have fantastic biotech franchises. they have third-rate oil companies without any real prospects for drilling where they are. we have tons of domestic oil and gas with ample opportunities to exploit them right here. they have nokia. we have apple. all right. apple got hammered today. but which would you rather invest in, nokia or apple? enough said. fifth, we have companies that catch takeover bids, companies where individuals can bring out value. what do they have? just this weekend we saw avon agree to consider coty's bid, in part because it's backed by warren buffett. yahoo replaced the ceo who apparently falsified his resume and embraces an activist who can bring out value. carl icahn steps into chesapeake. do you see people doing that stuff over in europe? do you think they would even let them? do you think that europe is open to that kind of capitalism? more on the difference later in the show. sixth, as pathetic as what was, a 2 billion loss, it won't
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even be felt even as it had to be acknowledged. i bet jpmorgan has a record quarter when everything sorts out. kind of loss would be enough to knock out the larger european banks. maybe even cause a run on them. our banks are incredibly well capitalized, much better than theirs. if we could just separate out the cowboy banks from the actual banks, we would find that the actual banks are doing quite well. but their performance is totally obscured by the undisciplined international cowboys that claim to be super disciplined. you know what is really pathetic? we keep hearing our banks need to offer a full plate of derivatives or lose businiess, to which i say lose the business to who? one of the former european members of the walking dead? and yes, they are all walkers over there, the european bank. they roam the continent. although if you shoot them through the head, could put an end to them. lamebrains. by the way, i wouldn't be surprised -- i would be let down even if jpmorgan's ceo jamie dimon doesn't waive his bonus or give last year's back.
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he is real rich. no major sacrifice. it does seem fair. finally, there is where we are in the business cycle versus where europe is. we're coming out of the great recession. our housing market after being crushed is on the rebound. number of foreclosures dropping, the amount of bad loans on the decline. companies and consumers who have used the low interest rates to refinance. so we have the best balances perhaps ever. the level of unemployment while not growing has stabilized. our deficit, while horrendous, is not producing higher interest rates. we have a stable political environment where the current president has presided over a mammoth increase in the dow jones industrial average. we have 50 states of harmony. federal reserve chairman who understood that a slowdown could mean a rise and kept rates low. what about europe? the weakest states can call the tune and the political paralysis is palpable. how about countries where the banks are just now getting hit by foreclosures after housing prices in places like ireland
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fallen 60%. how about horrendous unemployment getting worse. how about no growth and no unity? as abe lincoln told us, a house divided against itself cannot stand. the bottom line, as much as the bears try to link europe with the united states, we are blessed with many resources, lots of great companies, tremendous balance sheets, relative harmony and a system that is governable. we are coming out of bad times. they're going into bad times. and that's all she wrote. it doesn't mean they can't bring us down. they do, and they will. it does mean that we can't be brought down as hard or as long as they are. let's go to norbert in illinois. norbert? >> caller: boo-yah, jim. >> boo-yah, norbert. >> caller: previously you've always said south america was a trade and not an investment. >> yes. >> caller: not much good news out of south america. do you personally feel it's a place we shouldn't go? >> no, you can't. you can't take away the largest oil company and say big deal. let's go to joe in nevada, please. joe? >> caller: boo-yah, jim cramer. how are you doing today? >> ba-ba-boo-yah back at you.
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>> caller: i don't short stocks very much. but in the case of best buy i did at $26. and i noticed today they were up a little bit on a down day. is there something going on that maybe they're going to pull out of this tailspin? >> well, i mean we found out there really was just a personal issued involved with that ex-ceo. not a business issue, there was no fraud. so people get excited about that. to me this is just a larger unwind of radio shack. i don't want to be in best buy. i'm not going to recommend shorting any stock on the show, but i don't want to be there. listen to me. we are not europe, okay. our market is not europe. we're coming out of bad times. they're going into bad times. it doesn't mean they can't bring us down. doesn't mean we won't stay down. "mad money" will be right back. coming up, dream come true? shares of disney rose to new all-time highs last week after topping estimates. but, with the box office-busting film "the avengers" breaking records, is it still a good time to join the mickey mouse club, or has this ride reached its
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peak? cramer gets a tour of the kingdom with its ceo, next. and later, social security. the hype over facebook's upcoming ipo is filling up news feeds everywhere. but are investors missing some important notifications about its business? cramer's got the definitive breakdown of the digits behind the digital powerhouse ahead of its public premier. plus, meltdown? gold hasn't been shining this year. the shares of gold miner randgold resources have been downright dingy, tumbling over 25%. is it time to get in before they glitter again? cramer's exclusive with the company's ceo is just ahead, all coming up on "mad money." >> miss out on some "mad money"? get your "mad money" text alert today. text "mm" to 26221 to get cramer right on your phone. for more info, visit
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madmoney.cnbc.com, or give us a call at 1-800-743-cnbc.
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ave prodx and we have product y. we are going to start with product x. the only thing i'll let you know is that it is an, affordable product. oh, i like that. let's move on to product y, which is a far more expensive product. whoaaa. i don't care for that at all. yuck. you picked x and it was geico car insurance and y was the competitor. is that something you would pay for year after year? i, i like soda a lot but for a change of pace...
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♪ i got to be the only person who hasn't seen that yet. i got to get on my game. anyway, in this tumultuous market, we're always on the lookout for high quality stocks that can defy the downward gravitational pull of europe, stocks like walt disney, which is less than a dollar off its high, powered by one of the best quarterly reports of the year. disney is not just a household name, it's a terrific company that owns some of the most valuable brands on earth. one that we know is firing on all cylinders after it reported that fantastic quarter last wednesday. disney's park business on fire, and it should get even better as the price of gasoline goes down. cable properties including espn are red hot. one of the biggest hits of all time on its hands, you just saw a clip, "the avengers." a lot of cylinders to be firing on here. that's why i'm thrilled to have
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bob iger, the bankable chairman and ceo of the walt disney company here tonight. to talk about the quarter and what is ahead for his business. mr. iger, welcome back to "mad money." have a seat. it is always great to see you. "the avengers." it did it overnight, become the largest franchise that disney has? >> well, one of the largest. we've got a lot of great franchises. but we're thrilled obviously. incredible results. it broke records at the domestic box office the first weekend. broke records again for the second weekend. hit a billion dollars last night, i think after 18 or 19 days. >> explain this business to me. i don't know anyone who thought that this would be the number one movie. >> well, we had confidence in it. we believe in the franchise "avengers." we believe in marvel. we thought they made a really good movie. i must admit it exceeded our expectations. but that's a nice thing. >> but you also already had a sequel ready. >> the good thing about this is we had launched "ironman" a
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number of years back. >> i was in "ironman" once. >> that's right, that's right. maybe there is still time to be in 3. >> i'm there. >> we launched "captain america" and "thor" before this. then "avengers" comes out. we have "ironman 3" about to start shooting. "captain america" and "thor 2." and we announced last week "the avengers 2." this begets a number of great film properties. it's great news. >> what an acquisition. you already bought back all of the stock that you issued. >> we did. we're fortunate to have marvel as part of the disney family. it's a great brand, great franchise, and great people. >> now, can you explain to people how -- i've often talked behind the scenes about like a procter & gamble brand. go through the process of where you now make money in "avengers" now that you've got such a hit. >> well, of course they were making money in publishing. obviously, this improves that ability. the movie, clearly that will be successful.
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we've got a tv series on one of our disney branded channels, disney xd. it's a big consumer products franchise globally. and while we would have hoped that retail bought into this a little bit more aggressively going in, we know that they're searching for as much product as they could possibly get their hands on now. and that will last a long time, through christmas, and hopefully well beyond through these other films that we're making. and then of course the sequel, as i mentioned. and then of course the possibility of marvel appearing at our theme parks in a variety of places around the world. it's going to be a few years before you really see that. but there are plans in place to start taking advantage of those great characters. >> already. because i know it took a long time to do the new "cars" that is opening up. >> it takes time because we try to look for the right place. we try to design the right experience and slot it in at the right time. but we're talking now much more aggressively, as you would expect. >> right. >> about where marvel can occupy space at these great parks around the world. >> i tell people that you have a better handle on the consumer pulse than almost anybody.
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you've got theme parks and you have cruises. i know the cruise company have had some bad luck. they're not doing that well. your cruises and theme parks as a guide to how the consumer is doing right now? >> i think we defy gravity a bit. but we do, you're right. we're consumer facing. we have a good sense. i would say generally speaking, at least in the u.s., the consumer is feeling somewhat better than they did a year ago. they're still tentative. they still see a world that feels if not fragile, just slightly less known to them. there is a little bit of trepidation, a little bit of anxiety. but they want to take their kids on a family vacation. they want to go to disney. >> right. >> europe a little bit softer. asia on fire. >> on fire? not because japan is difficult, the easy compare? >> well, we obviously have that. but japan and the japan park is extremely popular, and it's way back. hong kong disneyland really doing quite well. a lot of demand to visit hong kong from the mainland.
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that's great. what we didn't talk about is the fact that our u.s. parks are getting good traction in certain overseas markets. >> the brazilians are coming here. tremendous. >> brazilians i think are the third largest international market to disney world in orlando. some in terms of our visa policy, we actually believe that more people can visit the united states from brazil, and more will visit disneyland from brazil. >> okay. let's talk about some of the more complicated aspects both interactive and abc. we have a big deal coming up for facebook. abc or vocal, it still reaches a lot of people. it's expensive to develop programing. you talk about that endlessly on your show. facebook the program is developed by the individuals so the gross margins are great. why would someone advertise on abc rather than facebook? >> i don't think they're comparable. and while facebook certainly has its positive attributes, i'm a user, as a matter of fact. i think that for the advertiser looking to really have an impact, for a 30-second
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television spot still has value, even in the world of dvrs and all kinds of time shifting and commercial skipping, a lot of people are still watching commercials. and what you can put in a 30-second spot, and we do for our movies and our dvds and our theme parks, is pretty impactful. you also have mass audience. even though there is a lot of fragmentation, there are a lot of places for people to go to watch programing, spend their time, see messages, we're still aggregating millions and millions of people at one time. and it's very timely. it's in the moment. you're an advertiser, you got a product coming out this weekend, you put a spot on national tv, more people are going to see that than any other place at that moment. >> now, for each marginal dollar, you have a difficult, a difficult thing to figure out what to do, particularly because of your new philosophy. one, you can put it in movies. two theme parks, three, broadcasts, or four espn. or five, dividend which seems to be the new orientation. which is the right place to put that marginal dollar?
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>> well, we created a blend. six would be buying stock back. >> right. >> and we've done all of that. we believe in our businesses. we believe in investing in them for the long haul, whether it's our branded movies, disney, pixar, marvel, clearly our theme parks, continue to invest in espn, continue to invest in other intellectual property, and we increased our dividends substantially last year, and we continue to be buyers of our stock because we believe generally speaking it's been undervalued. so we're blending how we create value and ultimately deliver capital back to shareholders. >> okay, harking back to an interview you did with me in december of 2009. you wrote "you have to understand that it's not perfect, that there is going to be failure. "this is about movies "and you know how to tolerate it." did you tolerate it after "john carter?" >> we did. we learned from the mistake and we moved on. i made sure that fingers were not pointed in any one specific direction. i believe that we live to fight another day.
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>> and you did pretty quickly. >> we did. we were lucky. little did we know. you know, yes, in the creative business, there is bound to be failure. you got to learn to live with it. just as i said to people you got to learn to live with success. you got to put that uniform on another week and try to win again. there is no guarantee you're going to. >> but "avengers" has avenged "john carter"? >> you said it perfectly. >> in 2009 i asked you about the internet. you said "i think we will eventually be able to make money." last week on the conference call, you said 2013, maybe we can make money. you know how to make money better than any ceo i know in this country. is it possible that you just can't make a lot of money at it? >> well, it's possible we can be profitable. a lot of money? in the scheme of things at disney we have these large divisions that make a lot of money. the internet and our interactive media businesses are important aspects of our branded businesses. and we are going to be
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profitable in those businesses. will it be a lot? probably not. >> it will never be as good as, say, espn, will it? >> it will take a while. >> do you -- did you get a chance to read david carr's column this weekend? >> i did. >> i just got to get your response. he interviewed the senior vice president for research at horizon. "tv has some interesting business models predicated on losing viewers each year." >> espn had record viewership this past year. abc is doing fine. disney channel, highest ratings in its history. i think we're doing fine. you have the program right. abc family, another channel that we own, great ratings. look, there is a lot of competition. and technology is changing how people consume everything. everything, not just television. but they're changing how they consume tv. there is still a way if you program right, i believe strongly in brands. they make a lot of sense. people find them first.
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you have to spend wisely. that means you've got to be efficient, but you also have to be aggressive about how you market and how you manage your brands. we still believe that owning intellectual property and selling it worldwide, which is one of the things that abc is doing, makes a lot of sense. going back to the disney channel, there are 103 disney channels around the world today. facing some challenges because viewership has changed in the u.s.? yes. they're finding disney channel in a variety of different places and markets all over the world. >> every time i speak to you, i know i've been recommending your stock since the day you came in. that's bob iger, chairman and ceo of the walt disney company. now you know why every time it's down, i come out here and say you got to buy dis. after the break, i'll try to make you even more money. coming up, social security. the hype over facebook's upcoming ipo is filling up news feeds everywhere. but are investors missing some
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important notifications about its business? cramer's got the definitive breakdown of the digits behind the digital powerhouse ahead of its public premier. how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies.
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he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. ale announcer) most life insurance companies look at you and just see a policy. at aviva, we do things differently. we're bringing humanity back to life insurance. that's why only aviva rewards you with savings for getting a check-up. it's our wellness for life program, with online access to mayo clinic. see the difference at avivausa.com.
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to buy or not to buy. that is the question, as in
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should you buy facebook or not when it comes to friday. >> buy, buy, buy! >> don't buy, don't buy! >> we're going to be looking at facebook from various angles all week in order to give you the most comprehensive analysis around. is facebook worth buying? as usual with an ipo, this is not a black and white issue. it's all shades of gray. facebook plans to sell 337.4 million shares. it will probably price higher given the tremendous demand for this deal. at the midpoint of the range, facebook could have a market cap of $86 billion. is that insane? does it represent the dotcom bubble again? i mean is that what is happening? i don't think so. if you can get in on the ipo, i think facebook is going to be a no-brainer, and i hate using that term. we all know this is going to pop like crazy on the first day of trading. if you get in on the deal, try to get your hands on as many shares as possible. 10 shares, 15 shares, 50 shares, get some.
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once it starts trading in the after market, that's a very, very different story. whether or not this stock is worth buying in the after market depends entirely on price. and i think the valuation might end up being too much of a stretch. but we'll talk more about that later this week. right now, though, we need to focus on what you would actually be buying, because you see, this market loves growth. and facebook has an incredible growth story. in the most recent quarter, its revenues were up 45% year-over-year. as of the end of march, the company has 901 million active users, a 33% increase from the year before. staggering growth. that's out of 2 billion total internet users around the globe. while facebook's new user growth rate will have to decelerate simply because of the law of large numbers, there is still room to expand its user base. everyone is going to be on facebook. they could have 1.5 billion active users by 2016. however, the growth here is really all about advertising, which is how facebook makes the majority of its money.
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and for advertisers, facebook does represent something akin to the holy grail. it gives them the ability to connect with the most coveted demographic out there, young people, in a way that is more immersive and effective than any other advertising out there. not just tv, but also the rest of the internet. the average facebook user spends about a quarter of their time on the web looking at facebook. and because people give facebook tremendous amounts of personal information for free, create the content for free, the company is able to target its advertisements in a way that nobody else can. facebook can target ads at the right audience with 90% to 95% accuracy, and that's much higher than the industry average of 30%. of course we know the tv is still a big winner. it's a huge opportunity for growth in mobile. where facebook has 488 million monthly active users. advertisers are more reluctant to spend on mobile. but if anybody can do it, facebook can. so we're going to keep seeing a massive migration of advertising
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dollars away from other media and towards facebook. this is just like what we saw with the rise of google a decade ago. as paid search listings represented a revolution in targeted ad spending. if anything, facebook is even more revolutionary than google was, and you know we recommended that one hard from the day it came public. in short, facebook is a game-changer, and it is run by a brilliant visionary ceo. i don't care that mark zuckerberg is only 28 years old. happy birthday, zuck. you need to analyze it in context of game changers of the past. imagine, imagine if you had bought apple when steve jobs returned to the fold in september of 1997. at the time the stock was trading at $5.48. if you picked them up when the visionary got there, 10,000% gain. microsoft. bill gates was 31 years old, got in on the ipo and held it until gates stepped down, 35,000% return.
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jeff bezos at amazon, 16,900% gain. think about google. just $85 a share. so far it's given you 611% return. that's why i think buying facebook as part of the ipo is an easy call. what about after it comes public, though? facebook's a fabulous company, but then suddenly we've got to talk about price, and is the price right? what do we think about? we think about valuation. because estimates for the company to earn $2 share in 2015. let's be really aggressive. let's say the consensus is way too conservative. let's say assume they can earn $4 a share in 2015. mark zuckerberg comes up with ways to be more profitable than anybody else. this is a business that scales dramatically because you the user provide all the content. once it goes public, will it still be cheap for 2015? say the stock shoots to $50, 43% increase from the high end of the price race. $50 is pretty good.
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but on the stretch, $4 number, a $50 price would be terrific. however, facebook vaults up to $80, then i think it's too expensive, because it means you would most likely be paying 40 times earnings for the $2 share in 2015. even the 2015 $4 number gives you a stock that may be too pricey at 80. no black and white answer here, though. it depends on how high facebook goes. if you can't get in on the deal, i think there will be a better time to buy than friday. you have to be patient. the reason? lots of big institutions will be able to buy on the deal. if they get 100,000 shares at the ipo price and 100,000 at the opening price, they're going to have a pretty darn good basis. but if you can't get in on the deal and just buy the opening price you will not have a good basis, and basis in cramerica matters tremendously in the bottom line. if you can get in on the facebook ipo, terrific, do it. this could be among the greatest growth stories of the year. but is it worth buying in the after market? the only answer i can give you
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is that it depends. at $50 it could still be a bargain. if it spikes to $80, totally realistic, by the way, i'm going to tell you to stay away. either way, though, you'll probably get a better time to buy facebook than friday. more on that tomorrow. dan in colorado. dan? >> caller: jim, professor cramer, boo-yah from colorado. >> man, good to have you on the show. what's going on? >> caller: i like cyber security. i'm playing it with two companies, websense at 17, and check point, which got slaughtered after their earnings. i unloaded half my position at 56. it's past your 5 to 8% buy-in. what do i do? >> check point didn't do the number. and the number is inviolate. you got to do the number. if you can't do the number, then i'm not going to recommend the stock. and they didn't do the number. so the answer is i'm taking a pass. let's go to ron in kansas, please. ron? >> caller: hey, a big kansas sunflower state boo-yah, jim. >> well, that's a sweet one, right? north dakota is the largest producer of sunflower oil. but that's all right. go ahead. >> caller: there you go. hey, i was kind of wondering
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about pitney bowes with this new facebook deal. what is your take on that? >> i think the stock goes down too much for me to be able to recommend it. something tells me you have a real red flag -- where is my red flag -- here it goes. when you have a dividend that is that high, it's now total red flag territory. i don't believe it until i see it declared. i like the facebook ipo. get in on it if you can. but if you can't and you have to pay after-market prices, i'm telling you that friday may not be the best day to pull the trigger. stay with cramer. coming up, the clock is ticking. call cramer at 1-800-743-cnbc to find out how to fire away at cramer on the "lightning round." can he withstand your thunderous onslaught of stocks? and later, meltdown? gold hasn't been shining this year.
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but shares of gold miner randgold resources have been downright dingy, tumbling over 25%. is it time to get in before they glitter again? cramer's exclusive with the company's ceo is just ahead. all coming up on "mad money." [ male announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha!
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it is time. it is time for the "lightning round." say the name of the stock -- >> buy, buy, buy! >> sell, sell, sell! >> i play this sound and then "lightning round" is over. are you ready, skee-daddy? i want to start with bobby in north carolina. bobby? >> caller: ba-ba-ba-boo-yah! hey, jim. >> steaming stuttering boo-yah. >> caller: i want to know what you think of axl. >> i like the auto parts company. people think they were slipping back. that's why this stock can't lift. i want to stay long on it. john in north carolina, john? >> caller: jim, first time caller.
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i watch your program on clne, clean energy. >> caller: i think clean energy is suffering from some comments by boone pickens where he says washington is hopeless, and clean energy -- there is still a lot of hope that washington will help. i thought boone pickens' comments -- i believe in the long-term story, but the short-term death knell, most definitely. let's go to charles in new jersey. charles? >> caller: yes, this is charles, the big tennis serve and power tennis player from spring lake, boo-yah. >> i love the food in spring lakes. near my ocean grove house. what's up? >> caller: numark mining. >> sell, sell, sell! sell, sell, sell! i've got enough problems. no. how about reggie in texas? >> caller: a big longhorn boo-yah to you, mr. cramer. >> not bad. hook 'em horns boo-yah. >> caller: what is your take on
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domino's? >> i had the banana peppers. i didn't have the spinach. my daughter had the spinach. no cheese because we're vegetarians. that said, dpz has come down a lot from where it was, and it paid that dividend. i want to step up to the plate. >> buy, buy, buy! >> that app is good too, by the way. don't forget to flip the guy something if the guy comes. he is working hard. let's go to ron in utah. ron? >> caller: professor cramer, boo-yah from sandy, utah. >> man, i'm liking it. if they're making me a professor in utah, i must have game. what's up? >> caller: you got it. mdrx, i'm way underwater. any chance? >> no. >> sell, sell, sell. sell, sell, sell! >> starting to sneak back. let's go to victor in washington, victor? >> caller: hey, how are you doing, man? >> pretty good. how about you? >> good. listen, what do you think about tempur-pedic? they put out a weak forecast a few weeks ago. the shareholders reacted very impulsively and cut it down to $87 a share to where it is now just above $50. where do you see this stock going?
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>> this is an easy one. we get the ceo on, we hash it out, we make the decision. without the ceo, no hash-out, we make no decision. let's go to vince in florida, please. vince? >> caller: hey, jim. first-timer. >> good. >> caller: boo-yah to you. i want to follow up with one stock you'll like, tibx. >> tibco, a great cloud play. they delivered, they delivered, they delivered. technology is going down, okay. so probably if you want an input at a place, price to buy the stock, i would say $25, $26, $27 will hold. right here -- >> don't buy, don't buy, don't buy. >> sorry, got to call it like it is. and, that ladies and gentlemen, is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td ameritrade. [ male announcer ] if you believe the mayan calendar, on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire.
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in the last few months, we have seen a vicious decline in the price of gold. it's erased all of the precious metals gains for the year and little more. for those who don't have any exposure to gold, i think this pullback represents the beginning of an excellent chance to buy what has been the best performing asset class of the last decade, one that has dramatically outperformed stocks. remember, gold is like insurance for your portfolio, something
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that goes up in times of great inflation or economic chaos, and it is a great institution for currency. i'm still a big believer in gold. the question is how should you own it? when it comes to the gold miners, though, they've been risky. while gld is down about 1% this year, most gold miners are down double-digits. take randgold, gold, it's the african gold miner that has given a phenomenal 2,310% return over nearly a decade. but it's languished of late, down 24% since the beginning of the year. it got hammered again today. randgold owns four operational mines throughout africa with a fifth that should come online by 2013. they're in politically unstable places, mali, ivory coast, senegal, democratic republic of congo. now randgold just reported back on may 3rd. even though the company increases production by 19% year-over-year, the stock got
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clobbered because lower grades of ore at some of their biggest mines caused a big increase in cash costs. the difficulty involved in getting it out of the ground makes the miners risky. so how is this best of breed growth stock, growth stock doing? let's talk to mark bristow, the ceo of randgold resources, to hear more about the quarter and the company's profits. mr. bristow, welcome back to "mad money." >> hey, jim. how is it? >> it sounds like all of the big worries like in mali where people were saying big coup, these guys are going to get hurt, ivory coast, none of these government changes impacted your earnings at all, did it? >> no, they didn't at all, jim. you're correct. >> and that's because you guys are -- you know how to deal with these situations? because i know a lot of other companies felt it was time to pack up and leave. >> yeah, i think a couple of things. first of all, when you rely on expatriates, then when things like this happen, people leave your operations. we have always focused on national management. and that helped a bit.
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at the same time, you know, i was there. we manage on the ground, and, you know, i think if you look at cnn and know -- and compare it with what actually happens on the ground, always a different story. >> and you make a point in your conference call of saying look, these mines are great for these countries. just to remind you when you slice the cake, just like you do in west africa, the government gets just a little bit more than 50% of the take. they don't want you to leave. >> absolutely. and in fact, in mali, no one has even mentioned the fact that they want to change the legislation. in fact, over the last quarter, mali government have dropped the tax rate. and everyone's worried about the importance of us continuing to provide jobs and delivering our tax revenues for a country that is very poor, and it needs every dollar it can earn. >> okay, now, on your conference call, there were some issues about gold grade. but you point-blank pretty much said that q-1 is going to be the
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lowest grade gold and things are going to get better from there. was each month better? >> absolutely. we guided in january that this year will have a quarter on quarter improvement throughout the year with the biggest improvement being from quarter 1 to quarter 2. and i stick by that. that's the way it is. that's the way we are. we mine according to the way they are in the ground. and we can't always predict how the grades are going to come out. >> you have talked from time to time about how it's so costly, costly to dig deep. but costly because of diesel fuel. we have seen for the first time since i've seen you a break in the price of crude. can this impact your bottom line if the trajectory for crude continues? >> well, yes. you know, a large part of our costs are diesel, because we generate our own power. but having said that, over the next five years, we're going to reduce our exposure to diesel as
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we develop the kibali mine in the congo, which is primarily going to be powered by hydro power. and recently we connected to the grid in ivory coast, which is primarily hydro power. so, again, as we evolve our production, grow our production, we're growing it with answers that are powered less and less by diesel. >> in kibali, you got 10 million ounces reserve base. that's a 2013 project. is it possible that you'll be able to get the costs of getting that gold out lower to start so it's got immediate returns? >> yes. you know, i think, jim, since we last speak, we started in western mali in june last year, we already paid that capital back. so we'll be paying dividends from this quarter, quarter 2. and kibali will come out of the blocks at around just under $600 an ounce. and, you know, given the current cost of fuel, et cetera. and it's a long -- it's a plus
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20-year life mine. average around $600 an ounce. it's a really profitable business. it will pay its capital back at these sort of gold prices, 2018, thereabouts. and i would just point out, you say the gold price is down. but i come from a gold price of $300. you know, $1500 is still a great gold price. >> i was going to ask you one last question. could gold be in free fall? or do you envision given how hard it is to get out of the ground that it could go back to a thousand dollars? >> no, i don't think that the industry would survive. a large portion of the industry will fall out of bed at prices just below where we are. so i don't think it's going to go down there. but this time of the year, we have a lot of volatility normally. and it's always a weak period in the year. and on top of that, everything is rather crazy out there globally. global economy is all mixed up. and we got to take some time before, you know, gold finds its place between the euro and the
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dollar. because things have changed a lot between the euro and the dollar in the last couple of weeks. >> well, anyway, mark, you've got the best growth gold company and i wish you the best of luck. you assured us this mali wouldn't be a problem and ivory coast wouldn't be a problem. you were dead right. everyone else was dead wrong. thank you so much for coming on "mad money." >> pleasure, jim. thank you for having me. >> if you want a growth gold, it's going to be rand gold. i still prefer the gld. so many of you like stocks. and you heard the performance of that stock. so if you want to own a gold stock, the best one going right now is randgold. stay with cramer.
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does carl icahn make chesapeake energy a better investment now that he has taken a position? people think they do because these two activist investors can be change artists, true catalysts to get something done, especially now that dan loeb is on the board of yahoo. they're both better as catalysts where companies have underperformed, even as the underlying franchises are pretty strong. their classic targets are classic sleepy companies that if woken up would do much better. or alternatively, they've invested putting companies into play so they ultimately get takeover bids. so let's consider whether these opportunities fit the bill. first, yahoo was once a great company, but it has fallen behind rather drastically, and it isn't clear if dan loeb can
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make something happen. that's because yahoo's market capitalization is humongous. yes, i'm sure the breakup value is worth more than the whole, but not much more, and that's what is needed here to make the stock worth investing in. i think it's not worth much more because of problems in the core business. yahoo is getting its butt kicked so hard by everybody on the web that it's a company that loses value seemingly by the week. that said, as long as there is no new ceo of anything but a temporary credential, a deal could happen. i would say two points up, not much down? hey, not bad in this environment. i will not bet against dan loeb because he is too smart not to bring out value. i just don't know how much value there is to bring out. the brand is still worth something. plus, who would have thought that aol had so much intellectual property? who knows how much yahoo has? certainly not the just ousted management team. chesapeake is a lot harder. a balance sheet that is horrendous. the core of the business is nat gas. while we know there are foreign bidders, they might believe that if left alone, chesapeake could default on the obligations
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eventually. i don't believe this is the case. i keep hearing chesapeake reminds some people of enron. i don't believe that. they're doing so many things that people don't understand that at least i understand the aspersions. the opaque nature leaves a lot to be desired. judging from the filings, it's hard to figure out how chesapeake gets out of the box given how much debt it has and the seeming unwillingness to recognize the risks as we heard on today's conference call. i have no doubt that icahn would like to put the whole firm in play, and i have no doubt there would be willing foreign buyers. the biggest reservations i have is would the chinese be allowed by the u.s. government to buy the whole company? because if they could, chesapeake might actually be a buy. otherwise i see the assets in decline because of natural gas. i don't expect a bottom in natural gas, and i would rather take a pass on owning this one for sure. third party activists do matter, but not as much as the fundamentals. and the fundamentals of both, to put it mildly, just aren't that hot. stick with cramer.
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this is your moment. let nothing stand in your way. devry university, proud to support the education of our u.s. olympic team. you know what i'm doing after the show tonight? i'm watching the incredible story of makers mark on "how i made my millions." it's on tonight at 9:00 p.m. and midnight on cnbc. horrible market. not denying it. ly

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